Good afternoon
The following was taken out of the Investec daily today...and it´s the answer as to why North American gold stocks don´t perform! The 5 cheapest, sizeable Australian producers EVN,NST, SBM, RRL and SAR have average costs of 720 US$/oz...EVN has 620 US$/oz...here the North Amrican majors, according to Investec / SNL:
¢ Gold majors’ all-in costs up 3% QoQ. Data gathered by S&P Global Market Intelligence showed that during the September quarter, the reported all-in sustaining costs (AISC) of the largest gold-producing companies rose to a weighted average of US$890/oz, a 3% increase on the previous quarter. Among the 21 companies with at least 500koz of attributable gold production, only nine had lower AISC during the 3Q, while the remaining 12 reported a quarterly increase. Source: SNL
Gold is gradually moving higher and feels pretty sexy...don´t ask me why, but it is....Buy EVN for oustanding quality and costs, and Western African for more speculative sex appeal....I also supported yesterday´s placement in Gascoyne, which at 40ct, looks way to cheap for me as well, and will be in production in 6-7 month time.
Reading Martin Wolf in the FT today is a real shocker...According to numbers he has from some Think Tanks, 45% of the planned tax cuts will go to households making more than 1 Mill$ p.a., and 38% to those making more than 1 mill$ - the latter represent 0,3% of the population. By 2027, households with income up to 50.000$ basically see no change....That is despite all these protestant low-income earners having voted him into the job! Perhaps this is the reason why gold is going up: In my opinion, the biggest social problem ( and problem for the security of the "haves" is growing inequality....this should be addressed, and not worsened! And I am not saying this, because I suddenly turned a socialist...I just want, that my kids will also be able to have their glass of wine in a peaceful enviroment in 20 years!
Copper and especially zinc stronger today, the rest unchanged...nothing stopping equities around the world...Uber getting the next kick in the bum from trying to cover-up a very large hack of their systems a year ago...just what this company needed...
Foran Mining - had another look at them, because I just cannot believe, how cheap this thing is - and I went back to find out, whether I calculated something wrong. And I do not believe, that I did! The PEA from I think 204 was calling for a NPV7 of 382 Mill$ ( market cap is 34 Mill! ) - that was based on 27.000t of yearly production of Zn, and 17.000t of copper. C1 cash costs then were quoted at 0,84US$ for copper, net of by-products, and a 14 year mine life. They assumed a currency of 0.89 Can$/US; copper at 3.08 US$; Zn at 0,93 US$; Pb at 0,93 US$. Today, the currency is 0,785; Cu is 3,15 ; Zn is 1,46 ; and Pb is 1.12 $...all substantially better. The problem was - and probably is - the high pre-production capital of 250 Mill$ incl 40 Mill$ of contingency - a lot of money for a small company. I have just done back-on-the-envelope numbers - they are approaching NPV of 550 Mill Can$, and pay-back of 2.5 years, which is pretty ok for a project with a mine life of 14 years, and lots of upside from exploration + hungry smelters next door...Similar companies are Heron in Australia ( 170 mill $ market cap ) and more so Venturex ( 72 Mill$ market cap ). Compared to those, FOM have to double - compared to the NPV, they should at least go up by 5 times. I know that this sounds stupid and racy - but numbers don´t lie! The biggest problem with this stock seems to be, that the major shareholders are too wealthy - there does not seem to be much need to push this asset as hard as it deserves! As you know, I have a large position in Foran.
Many placements happening in Australia every day...it can only be a question of time for drilling rates to go significantly higher. I am playing the sector via a small-cap, Swick Mining, which has not been terribly successfull so far. The company has invested a lot of money in an innovatice assaying technique, which the market seems to largely discount. For now, 100% of revenue is coming from drilling - I think it´s a question of a few month to see this stock higher - and if their assying stuff gains any traction ( it will have commercial launch this financial year ), they could go a lot higher. Gearing is small - so the balance sheet looking ok , too. If you assume a 20% increase of revenue, and an increase of EBITDA-margin from 9.3% to the historic 12%, the stock looks very cheap to me - that´s before the new assaying technology makes any contribution.
Have a nice evening
WS
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